Euro to Dollar Outlook 2023: Range "Between 1.0780 and 1.0965" say UoB

November 24, 2023 - Written by Tim Boyer

STORY LINK Euro to Dollar Outlook 2023: Range "Between 1.0780 and 1.0965" say UoB

With the US Thanksgiving Holiday undermining trading volumes, the Euro / Dollar exchange rate has settled around 1.0900 with the Euro unable to make headway.

The relative outlook for US and Euro-Zone growth will remain a key driver for currency markets and EUR/USD.

The latest Euro-Zone data eased fears over a deep recession, but did little to spark optimism over the economy.

The German PMI manufacturing index edged higher to 42.3 for November from 40.8 previously and above consensus forecasts of 41.2.

The services-sector index also improved to 48.7 from 48.2, but still in contraction territory.

There was a similar picture across the Euro-Zone as a whole with the manufacturing index at 43.8 from 43.1 in October with the services index at 48.2 from 47.8.

The manufacturing sector has been in contraction since July 2022 while this was the fourth successive month of contraction within the services sector.


Net employment declined for the first time in close to three years.

TraderX strategist Michael Brown commented; "There's been a bit of an upside surprise on Germany and the euro zone and yes, it's an improvement on the prior, but all this is saying is things are getting slightly less bad."

He added; "It's not exactly cause for much optimism and basically reiterates what we already knew: that the economy is facing a tough winter ahead."

The equivalent US data will be released on Friday given the US market closure on Thursday.

Consensus foreacsts are for the manufacturing index to remain at the 50.0 level for November with slight net growth for the services sector.

On Wednesday, US initial jobless claims were reported as declining to 209,000 from 233,000 the previous week.

According to ING, “it’s an indication of good labour market resilience ahead of the 8 December payrolls data, which will be key in setting the tone for FX into Christmas.”


MUFG considers that the US labour market is still cooling; “the recent payrolls report still revealed further evidence of softening labour demand which is moving more into balance with labour supply. A development Fed officials wanted to see in the coming months to give them more confidence that they have tightened policy sufficiently.”

Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corporation declined to sound the all-clear; "The dollar has partially rebounded after recent weakness, markets are reminded from the University of Michigan survey that inflation expectations for the next 1 and 5 years stay sticky, and that rates could stay higher for longer."

Markets are still convinced that the Fed will not increase interest rates again, but the pricing of a March rate cut has declined to 25% from 30% earlier in the week.

Commerzbank notes that the dollar is overvalued at current levels and added; “if it became clear that the significant growth advantage of the US is permanent and not just the result of a temporary period of European weakness, an even more pronounced undervaluation of the EUR would be justified. That is not yet the case.”

Overall Commerzbank’s US economists expect that the US will slide into recession in 2024 and this would make massive Euro undervaluation as unjustified.

This is a key rationale for the bank expecting EUR/USD gains next year. It forecasts EUR/USD at 1.12 by June 2024.

From a longer-term view, it notes; “once the US recession is over, our US economists expect the US growth advantage to come to the fore again. That too confirms our view that the EUR recovery we expect to see medium-term will not last forever.”

Energy prices will be important for the Euro and there have been choppy conditions over the past 24 hours.

According to MUFG; “On balance, we view a lower oil price as a factor that helps to ease upward pressure for the US dollar.”

UoB commented; “From here, EUR is likely to trade in a range, probably between 1.0780 and 1.0965.”

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TAGS: Euro Dollar Forecasts